Applegreen is ripe for expansion

28 May 2015, 13:09

Leading Irish petrol forecourt retailer Applegreen has announced its intention to float on AIM and Ireland's ESM. Seeking to raise around £50 million, the first Irish retail IPO since the recession is coming to market with ambitious expansion plans.

Click here to read today's intention to float statement from the profitable, cash-generative petrol forecourt operator, with fifty-plus sites in the UK and almost one hundred in Ireland as at end-December. Guided by ex-Esso man Bob Etchingham, CEO, Applegreen is the Irish Republic's leading motorway service station operator by site number, claiming a 12% share of the car fuel market in the Republic of Ireland.

Float proceeds are earmarked for acquiring and developing new sites across the UK and Ireland and for upgrading existing sites to enhance profitability. The IPO will also provide additional firepower for developing new, larger motorway service area sites.

Structural change in the fragmented petrol station market is creating opportunities for independents such as Applegreen. Oil majors are beating a retreat from front line fuel retailing and re-focusing on oil exploration and development, while the decline of the out-of-town supermarket model suggests the grocers' scope for market share gains in fuel is limited.

Applegreen offers some of the lowest fuel prices at its locations, which is driving footfall to its premium food and hot beverage products, aimed at the high-growth food-to-go and convenience market. Its locations span own food brands aCafe and Bakewell, as well as household names including Costa Coffee, Burger King and baker Greggs (GRG).

Management stresses the scalability of the business, which managed to shrug-off the downturn across the Irish Sea over the past four years. The company reports compound annual growth of 19% and 24% in earnings before interest, taxation, depreciation and amortisation (EBITDA), and sales respectively, during that spell.

Macro and structural trends now look more favourable. Ireland is forecast to have the fastest growing economy in Europe in 2015. Alongside increased disposable income, this should boost car usage, driving higher spending on petrol and convenience food purchases, spend on the latter being driven by trends towards eating out and snacking on the move.

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